CA’s A3 Education Indictment: The Counts of Sean McManus et al.

June 19, 2019

In this post, I offer excerpts of the 67 counts detailed in the 235-page indictment of Sean McManus, Jason Schrock, and nine others who used weaknesses in California’s charter school laws to construct a network of fraud and launder $50M in public funds into their own pockets over the course of years. These 11 individuals (and unidentified others) did so by opening multiple charter schools and using companies, both pre-existing and newly-created, to establish a complex system of self-dealing– with little to no education actually happening via those exploited, educational dollars.

I wanted readers to be able to view some of the charges firsthand. I could not post all of them because of length. However, what I offer hear provides useful insight in how McManus’ et al. scheme operated.

Counts 1 and 4– Conspiracy to Commit a Crime

(Count 1) On or about and between January 1, 2016 and April 20, 2018, Sean Joesph McManus, Justin Kent Schmitt, Jason Alan Schrock, Nyla June Crider, Michelle Claudia Kalehua Kukahiko, and Kealii Troy Kukahiko did unlawfully conspire together and with another person or persons whose identity is unknown to commit the crime of Theft of Public Funds… Prodigy Athletes….

(Count 4) On or about and between January 1, 2016, and April 20, 2018, Sean Joseph McManus, Justin Kent Schmitt, Jason Alan Schrock, Nyla June Crider, Michelle Claudia Kalehua Kukahiko, and Kealii Troy Kukahiko did unlawfully conspire together and with another person or persons whose identity is unknown to commit the crime of Grand Theft… Prodigy Athletes….

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The object of the conspiracy was to misappropriate public funds by falsely claiming and obtaining apportionment funding for students attending charter schools when the students were not receiving charter school services at the time claimed. Conspirators knowingly paid pre-existing athletic organizations for studet report cards and falsified charter school enrollment documentation which allowed the conspirators to request and obtain state funding for the athletic participants over summer under false cover of them being students of charter schools. Conspirators knowingly obtained state funding for children who were not assigned certificated teachers as required by law, were not in contact with the charter school, and who were not provided any educational services during the dates claimed.

…

Counts 2 and 5– Conspiracy to Commit a Crime

(Count 2) On or about and between January 1, 2016, and February 11, 2019, Sean Joesph McManus, Justin Kent Schmitt, Jason Alan Schrock, Eli Ralph Johnson, Richard Ba Nguyen, Nyla June Crider, Steven Brain Zant, and Robert John Williams did unlawfully conspire together and with another person and persons whose identity is unknown, to commit the crime of Theft of Public Funds… Misrepresenting charter school services to obtain additional public funds….

(Count 5) On or about and between January 1, 2016, and February 11, 2019, Sean Joseph McManus, Justin Kent Schmitt, Jason Alan Schrock, Eli Ralph Johnson, Richard Ba Nguyen, Nyla June Crider, Steven Brain Zant, and Robert John Williams did unlawfully conspire together and with another person or persons whose identity is unknown to commit the crime of Grand Theft… Misrepresenting charter school services to obtain additional public funds Marketing….

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The object of the conspiracy was to collect public funds from the state for charter school enrollments they were not lawfully entitled to collect. These include a variety of measures:

Conspirators knowingly collected public funds for large amounts of students for “summer school” through a multitrack attendance calendar, claiming Track A, started on July 1 and ended 175 days later, but in reality Conspirators openly advertised and intentionally enrolled students in school for 40 days only, and claimed to the State that students all voluntarily withdrew before 175 days. To increase profit from Track A enrollments, Conspirators did not assign teachers to Track A at lawful teacher to student ratios.

Conspirators also enrolled children for Track A from pre-existing youth programs such as sports teams, camps, gyms, private schools both religious and secular, and private enrichment centers. Conspirators paid pre-existing youth programs for student report cards and enrollment documentation and used the documentation as the basis to enroll students in public charter schools. Conspirators provided limited to no services to the pre-existing programs and did not assign teachers at lawful pupil to teacher ratios. Conspirators paid the pre-existing youth programs a fraction of what was received in public funds from the state for 40 days of enrollment.

Conspirators also operated an online and homeschool program that operated both during the regular school year and over the summer. Conspirators knowingly obtained additional ADA funding for full year students over summer, by un-enrolling them in their charter school, and enrolling them in a separate “sister” charter school without the student’s or parent’s knowledge.

Conspirators knowingly manipulated invoices to come into compliance with the 80% / 40% spending requirements, required for 100% funding they received through the charter schools’ non-classroom based funding determination approved by the State Board of Education. Conspirators also knowingly manipulated how teachers were assigned across charter schools to feign compliance with the pupil to teacher ratio for funding determinations.

Conspirators evaded oversight by knowingly manipulating financial and programmatic information given to auditors. Conspirators also changed auditors when questioned about operations.

Conspirators evaded oversight by courting and seeking charter school authorization from small school districts across California who were suffering declining enrollment and budget woes. Conspirators provided their authorizers significant additional state funding and services in the form of oversight fees. Conspirators knowingly approached these small districts because they were not in a financial position to challenge Conspirators’ enrollment practices through oversight and could not afford the revocation process.

Conspirators evaded oversight by identifying subordinate administrators as the CEO of charter schools on public documents and as the contact person to state agencies to hide the leadership of the charter schools.

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Counts 3 and 6– Conspiracy to Commit a Crime

(Count 3) On or about and between January 1, 2016, and April 1, 2019, Sean Joseph McManus, Justin Kent Schmitt, Jason Alan Schrock, Eli Ralph Johnson, Richard Ba Nguyen, Steven Brain Zant, and Robert John Williams did unlawfully conspire together and with another person or persons whose identity is unknown to commit the crime of Theft of Public Funds… Charging for services not provided to facilitate transferring public funds to business entities owned/operate (sp.) by Sean McManus and Jason Schrock….

(Count 6) On or about and between January 1, 2016, and April 1, 2019, Sean Joseph Mcmanus, Justin Kent Schmitt, Jason Alan Schrock, Eli Ralph Johnson, Richard Ba Nguyen, Steven Brain Zant, and Robert John Williams did unlawfully conspire together and with another person or persons whose identity is unknown to commit the crime of Grand Theft… Charging for services not provided to facilitate transferring public funds to business entites owned/operate (sp.) by Sean McManus and Jason Schrock….

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The object of the conspiracy was to generate public funds from charter schools under their control and misaapropriate those funds by transferring them to private companies operated and/or owned by Conspirators under cover of providing educational and instructional services when no such services were provided by those companies. Conspirators themselves, and through subordinates courted small school districts across California who were suffering budget woes and suggested they authorize charter schools as a means to generate additional state funding for the district in the form of oversight fees. Conspirators took measures to disguise their relationship as manager and operator of both(?) the charter schools and private vendors and charter management organizations. Conspirators, while in total control of all of the finances for the charter schools, invoiced to the charter schools and paid out to the companies they owned and controlled for educational and instructional services that were not provided.

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Count 7– Public Moneys– Misappropriation

On or about and between January 1, 2016, and April 1, 2019, Sean Joseph McManus, Justin Kent Schmitt, Jason Alan Schrock, Richard Ba Nguyen, Nyla June Crider, Michelle Claudia Kalehua Kukahiko, and Kealii Troy Kukahiko, being a person charged with the receipt safekeeping, transfer, and disbursement of public moneys, did unlawfully, and without authority of law, appropriate the same and any portion thereof, to his own use, and to the use of another…. Misrepresenting charter school services provided by Prodigy Athletes to obtain additional public funds.

Counts 8 through 11– Public Moneys– Misappropriation

On or about and between January 1, 2015, and April 1, 2019, Sean Joseph McManus, Jason Alan Schrock, Richard Ba Nguyen, and Robert John Williams, being a person charged with the receipt safekeeping, transfer, and disbursement of public moneys, did unlawfully, and without authority of law, appropriate the same and any portion thereof, to his own use, and to the use of another….

(Count 9) Charging for services not provided by A3 Consulting to facilitate transferring public finds to A3 Consulting.

(Count 10) On or about and between January 1, 2016, and April 1, 2019… Charging for services not provided by Mad Dog Marketing to facilitate transferring public funds to Mad Dog Marketing.

(Count 11) On or about and between January 1, 2016, and April 1, 2019… Charging for services not provided by Global Consulting Services to facilitate transferring public funds to Global Consulting Services.

Count 12– Public Moneys– Misappropriation

On or about and between January 1, 2016, and April 1, 2019, Sean Joseph McManus, Jason Alan Schrock, and Richard Ba Nguyen, being a person charged with the receipt safekeeping, transfer, and disbursement of public moneys, did unlawfully, and without authority of law, appropriate the same and any portion thereof, to his own use, and to the use of another…. Using public funds designated for one charter school to pay for the expenses of another charter school.

Counts 13 through 16 continue with charges of misappropriation of public moneys, including “aggravated white collar crime enhancement” (counts 13 and 16) “which involved a pattern of related felony conduct which involved the taking and resulted in the loss by another person and entity of more than five hundred thousand dollars.”

Count 21– Public Moneys– Misappropriation

On or about and between January 1, 2016, and April 1, 2019, Sean Joseph McManus, being a person charged with the receipt safekeeping, transfer, and disbursement of public moneys, did unlawfully, and without authority of law, appropriate the same and any portion thereof, to his own use, and to the use of another…. Directing employees to backdate master agreements to receive additional public funds.

Count 22– Conflict of Interest– Specified Officials

On or about and between January 1, 2016, and April 1, 2019, Michelle Claudia Kalehua Kukahiko, being a registrar of a Public Charter School, Valiant Charter Schools, and thus an officer and person prohibited by the laws of the state… from being financially interested in contracts made by him in his official capacity, and by a body or board of which he was a member; and from being a purchaser at any sale made by him in his official capacity; and from being a vendor at any purchase made by him in his official capacity, did willfully and unlawfully violate the provision of such laws, by Contracting with Prodigy Athlete, a Company Michelle Claudia Kalehua Kukahiko owned and operated….

Counts 24 through 66 concern Alan McManus and Jason Schrock’s conflicts of interest in operating individual charter schools that they contracted with using businesses that they owned and operated. (Think of each individual charge as a strand in this greater self-dealing web.)

Count 67– Conflict of Interest– Specified Officials

On or about and between December 1, 2016, and April 8, 2019, Robert John Williams, being a Board member of Cal Prep Sutter, a Public Charter School, and thus an officer and person prohibited by the laws of the state… from being financially interested in contracts made by him in his official capacity, and by a body or board of which he was a member; and from being a purchaser at any sale made by him in his official capacity; and from being a vendor at any purchase made by him in his official capacity, did willfully and unlawfully violate the provision of such laws, by Contracting with Williams Accountancy, a company Robert Williams owned and operated….

In January 2013, the San Bernardino Unified School District soundly rejected a McManus charter school application “as not consistent with sound educational practice” and for “deficiencies/concerns.”

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Good job. I did not get through the whole list of charges. “You will be a high quality teacher if you bring in 30 students” floored me, but unless I am mistaken other recruters for charter school are “incentivized” in some way. Somewhere in my blog notes I have some documentation on payola to parents of charter school students who recruited others.